Builder advertises honesty, but it’s only in aid of planned IPO!
Moneylife Digital Team 06 April 2011

Marvel Realtors of Pune is advertising its avowed honesty towards customers. But on checking out this sudden outburst of honesty, we found that it is only a corporate branding exercise in aid of a planned IPO

The jacket of The Times of India on Tuesday featured a full-page advertisement by Marvel Realtors, which said that unlike other builders, they will not cheat customers with false figures about built-up area. "We will give them all details about the property they are about to purchase," said a sales executive from the company. "We will tell them what the carpet area is, how much is the built-up area, so that they do not pay for what they are not getting."

Why the gesture? The executive said, "It is a part of our branding exercise. We are planning to come out with an IPO, and this exercise is its starting point." The company website has been down, and the CEO, Vishwajit Jhavar could not be contacted.

While it is a matter of speculation exactly what the connection between honesty and the IPO is, experts think that the gesture may not necessarily endear them to investors. Arun Chitnis, assistant vice-president, marketing, Jones Lang LaSalle Meghraj, says, "Definitely, the realty sector suffers from a lack of transparency, so if you assure people that you are not going to cheat them, it is fine. But if the gesture is aimed at gaining favours at the time of the IPO, it may not be enough. After all, investors would research well before investing and not because they saw an advertisement that proclaims honesty."

Neither is the promise of transparency something new. After the spate of scams befell the sector and the dismal market condition, many developers have tried to regain public confidence. "The only difference is," Mr Chitnis said, "they may not be advertising it in bold letters."

No wonder, the company has already received feedback along those lines. "Many people have told us they are happy about our promise, but many are also asking us what is new about it, because other builders are also saying the same thing," the sales executive remarked.

A representative from a realty consultant firm said, "The question is not how honest you are with your customers, but what kind of price structure you have. One can afford to be honest about charging exorbitant rates. The problem is such gestures are a poor excuse for sky-high prices."

A sector analyst agrees. "It will be far fetched to say that corporate branding exercises indicate that the IPO will be investor friendly. An IPO is a way to raise huge capital, and ultimately benefits the company. The realty sector is under a lot of pressure and developers are looking for a way out. The investor must be cautious."

The realty sector is looking desperately for alternatives to lure buyers back at a time when sales and sales registrations have plummeted. While a handful of builders are offering discounts and are considering corrections, prices remain unaffordable because most of the big realtors hold on to their stocks. However, smart investors are unlikely to fall for such branding exercises.

1 decade ago
honesty cannot be advertised. go into the past of this company and you can extrapolate its future
1 decade ago
Long ago, one builder who genuinely wanted to be honest, Alacrity Housing became victim of the corrupt environment.

I do not know if a builder can be honest, given the structural flaw of the whole industry.

Honesty is a hygiene factor in a financial transaction or far that matter in any meaningful relationship.

Honesty cannot be a sales strategy.

Even in mutual fund industry, one fund house and especially one gentleman heading the same claims to be the most honest individual. May be.

Claiming that one is honest and also constantly implying (like the above gentleman) that others are dishonest, is a flawed sales strategy.

Honesty is the safe way to run a profession or business.
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